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Trade finance compliance: Why bank staff must understand, apply and log suspicious activity

06 March, 2019David Morrish

David-Morrish- and-Amanta-Ong-at-the-Indonesia-International-Chamber-of-Commerce-ConferenceTrade finance compliance expertise is about so much more than maintaining the integrity of the finance industry. Following his talk at the Indonesia International Chamber of Commerce Conference in February, David Morrish explains why.

Dirty money is a global problem

Every dollar laundered helps criminal activity to flourish.

The global illicit drug market is estimated at over US$300 bn and people trafficking is a huge problem. There are well over 20 million slaves in the world today – more than the population of London, New York, and Los Angeles combined.

From the ‘first world’ to the ‘third world’ there are few countries untouched by the consequences of terrorism. And terrorism is financed by dirty money.

Then there are the rogue countries – the ones secretly building weapons of mass destruction. The international community puts sanctions in place to both deter and punish activity that destabilises the world order.

But sanctions are not always enough. Businesses and financial institutions need to know where money is coming from and going to. That means being actively engaged in trade compliance.

Know your customer and exercise customer due diligence

Two critically important concepts for any business are:

  • exercising customer due diligence (CDD) – focusing on the potential customer before the relationship starts and
  • knowing your customer (KYC), especially who controls how the business operates and screening key third parties involved in the transaction

Implementing solid CDD and KYC can help you comply with anti-money laundering (AML) regulations.

It’s important that staff understand the concepts of under- and over-invoicing as well as phantom shipments that are used to launder money. This is when an exporter invoices its client for goods that are not actually shipped. The buyer, colluding with the exporter, pays for the goods as if they had been legally shipped and received.

Without effective trade finance compliance procedures, you could lose your business and even your freedom

Fines can be severe and ultimately, a bank may lose its licence.

Bank staff can be fined or prevented from working in the financial services industry. In extreme circumstances they could go to jail. When a bank has been found non-compliant in a serious financial crime case, all stakeholders could be fined.

And there’s a reputational cost. Customers lose trust in the brand and business partnerships suffer.

Organisations need to implement robust preventative, detective and corrective controls and reporting mechanisms. And they must make them part of staff culture.

Our trade finance qualifications are recognised internationally and studied in over 90 countries. They could help your staff enhance their knowledge and skills, and so protect your organisation from these risks.

Find out more

The 2nd Annual Trade Finance Compliance Conference will take place in London on 16 and 17 May 2019.

Find out more and register